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ETF Specialist

A Well-Diversified Foreign-Stock Fund With a Value Tilt

This solid value strategy can make some risky bets.

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Investors in search of foreign-value exchange-traded funds currently face a limited menu. To make matters more difficult, the few funds on offer tend to overweight stocks from certain sectors, like financials, which compromises their diversification.  Schwab Fundamental International Large Company Index ETF (FNDF) is a compelling alternative. It tilts toward stocks trading at lower valuations relative to the market. But this fund also maintains a well-diversified portfolio, allowing it to take advantage of mean-reverting prices wherever they occur.

FNDF is a solid low-cost fund that weights its holdings by fundamental measures of size, giving it a value orientation. While it maintains diversification, it can be a risky because it ignores market prices and can overweight stocks with declining fundamentals, warranting a Morningstar Analyst Rating of Bronze.

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Daniel Sotiroff does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.